Britain's university system has always been hierarchical: the most prestigious expect to be ranked among the world's leading institutions, while their lower-ranked peers are too often recognised only for improving the chances of the poor.

Now the system is expected to undergo the most far-reaching shakeup for decades, and it is likely to become even more stratified. The elite have yearned to charge as much as their Ivy League competitors in the US, some of whom demand as much as £23,000 a year. A dramatic rise in income would protect the most prestigious from deep cuts over the next few years.

Higher fees would mean they could move towards lavish, US-style bursaries so that students from the poorest homes are not deterred from studying by fear of debt. Able to attract the brightest academics and students internationally, the top universities would find their already considerable reputations rocketing.

Many would respond by making their courses even more internationally relevant. Some, like University College London, have started to develop a liberal arts degree. The course, common in the US, mixes the humanities and sciences, for instance. UCL's provost, Malcolm Grant, says it creates "global citizens" rather than students with "a narrow view of the world".

While the elite prosper, the rest will undoubtedly be worse off. Some 30 or 40 – a quarter of the sector – will struggle financially. They recognise that they cannot charge £7,000 or £10,000. Their students simply wouldn't – or couldn't – pay.

At Bedfordshire 70% of students are on a full grant, meaning their parents' household income is less than £25,000. "Universities like mine will not be charging £7,000," says Professor Les Ebdon, Bedfordshire's vice-chancellor. "I would put the ceiling at £5,000." Even at this figure, he would see a 5% drop in students – just over 600 undergraduates.

An ideological difference between the elite and the rest is also emerging. Some believe it is morally wrong to double or triple fees. George Holmes, vice-chancellor of Bolton, says he doesn't want to "make a profit" from fees. "We just wish to cover our costs. We want to ensure that students get a fair deal. I'm not into high mark-ups. Some universities will seek to exploit their brand."

But whether they like it or not, even these universities will be forced to raise fees. Later this month the spending review is expected to strip billions from university coffers. Cuts of between 25% and 40% are likely. Professor Geoffrey Crossick, vice-chancellor of the University of London, has said that universities will have to charge £6,000 or £7,000 "just to stand still".

Universities could be forced to double fees on some courses just to preserve their income. Bedfordshire, Wolverhampton and Bolton acknowledge that they will have to make up the shortfall.

"The reason for raising fees would be to replace the funding that the government takes away," says Professor Tim Wilson, vice-chancellor of Hertfordshire.

No one knows yet how many students would be deterred from coming to the newer universities if they charged £7,000. But research by Leicester University has predicted that some would see a "potentially disastrous drop" in numbers.

And in anticipation of the drop in students, universities outside the elite have already started making drastic cuts – Swansea is planning to reduce by half the number of academics in its modern languages department.

Students from ethnic minorities would be disproportionately affected. London Metropolitan University accepted 6,115 black students in 2007-08 – almost as many as the 7,815 black students spread among 20 universities in the Russell Group.

Along with Swansea's planned cuts, Leicester and Queen's Belfast have also revealed plans to close their German departments.

Gipps says many vice-chancellors are looking to shut courses where the numbers of students are small. Wolverhampton no longer does chemistry, but offers biomedical sciences instead. It has stopped admitting students to degrees with European languages because "very few were coming forward".

Some universities outside the elite could even go to the wall.

Berkshire Consultancy polled 30 deputy vice-chancellors and found 90% believed university closures were possible in the next decade. Almost a third said their universities were already struggling to cope financially. Another poll, last month, by PA Consulting found three-quarters of vice-chancellors thought some universities would "fail or disappear" in the next three years.

But while closures are a real worry, it is more likely that a free market would drive universities to become more specialist in what they teach.

The newer universities may withdraw from "abstract" subjects, such as history and English, to concentrate on those that are more vocational. Some fear we will be turning back the clock to the days when we had polytechnics and just a handful of universities.

But others see it in a different way. Professor Julian Beer, pro vice-chancellor at the University of Plymouth, argues that too many institutions have spread themselves too thinly and tried to "do it all".

Some 13 years of relatively generous state funding has encouraged homogeneity, Beer told Times Higher Education magazine this week. He has analysed every university's mission statement and concludes that 70 institutions have failed to carve out a market niche for themselves.

Such sentiments are echoed by the rector of Imperial College London, Keith O'Nions, in an interview with the Guardian this week. O'Nions said British universities were likely to become far more similar to their American counterparts in future, with some institutions focusing solely on teaching rather than research.

We would do worse than to model ourselves along the United States' highly stratified university structure, O'Nions said. There, two-year colleges focus on teaching courses below degree level, four-year colleges offer degrees, while universities focus more on research and offer degree and postgraduate courses. Each of the three tiers is held in high esteem and acknowledged for the different role it plays within the system.

British higher education can expect to see hybrid public-private universities emerge.

BPP, a for-profit college which offers business and law degrees at 14 sites across the country, became Britain's first private university for 30 years in July. The move – approved by the universities minister, David Willetts – signals the government's desire to expand the number of profit-making private sector institutions in higher education.

Carl Lygo, BPP's chief executive, told the Guardian that since July, publicly-funded universities that are struggling financially had contacted him about working together and forming hybrid institutions.

One of the most radical proposals that could come from Browne would be to allow universities to charge different fees for different courses. This won't necessarily mean those institutions that aren't ranked highly will offer rock-bottom prices though.

Bolton believes it could charge £8,000 or even £10,000 for its photography degrees. It won't, out of principle, but others may take less of a moral high ground.

Professor Robert Burgess, vice-chancellor of Leicester University, says for a true fees market to emerge, institutions need to be able to set fees at different levels for different courses.

"Under those circumstances, newer universities would still be able to charge the maximum for their most popular and highest quality courses, while research-led institutions may need to charge less than the full amount for less popular programmes," he says. He acknowledges that this would signal "a major cultural shift for students and universities" and would only work if there were sufficient bursaries and scholarships to ensure that students from poorer backgrounds or families with little or no experience of higher education were not disadvantaged.

Professor Brian Cantor, vice-chancellor of York University, says his preference would be to have a single fee for all subjects. "Until we do a detailed study, we can't say whether that will be possible," he says. "We want students to be able to select between subjects based on academic, rather than financial grounds."

A free market is looming. One consequence of all this, says Richard Scullion, a senior lecturer at Bournemouth University who has written a new book –The Marketisation of Higher Education and The Student as Consumer – is that universities will feel they have no choice but to behave even more like commercial businesses. "Everyone involved will act as if they are agents in a market and students will be even more demanding consumers."